CFTC and SEC plan meetings to co-ordinate activities

The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) will hold joint meetings in September to address regulatory overlaps, and streamline regulation of financial instruments.

The meetings are to be held on September 2 and 3 and follow the Obama administration's June white paper - Financial regulatory reform: A new foundation - which called for the two bodies to harmonise their operations. After receiving responses from market participants, the agencies will write a report to Congress by September 30, detailing their recommendations.

The paper stipulated that the regulators' report should include recommendations "that would harmonise regulation of futures and securities". It should also identify "all existing conflicts in statutes and regulations with respect to similar types of financial instruments and either explain why those differences are essential to achieve underlying policy objectives with respect to investor protection, market integrity, and price transparency or make recommendations for changes to statutes and regulations that would eliminate the differences".

"There are three areas where this review will most benefit the US public: to address gaps between the two agencies' financial regulatory authorities, to assess the effects of regulatory overlap and to bring appropriate consistency to the two agencies' regulation over similar products, practices and markets," CFTC chairman Gary Gensler explained.

Mary Schapiro, SEC chairman, added the meetings should "build on the progress the CFTC and SEC have made on designing a framework to regulate over-the-counter derivatives". One of the main recommendations of the June paper was that "all standardised OTC derivatives transactions be executed in regulated and transparent venues and cleared through regulated central counterparties".

Several market participants have called for the two agencies to merge. Testifying before the Senate Committee on Banking, Housing and Urban Affairs on June 18, Treasury secretary Timothy Geithner acknowledged that valid reasons existed for a merger. "Congress has considered many times in the past proposals for merging both entities and there is a simple and compelling rationale for doing that. What we propose is to begin by bringing the underlying statutes - which are substantially different for [financial] products with similar attributes - into conformity. We think that helps solve most of the substantive problems that exist by having separate regulation of securities and futures; it won't solve all of them, but it is a necessary step toward any effort to merge [the SEC and CFTC] and we think that is a good challenge to take on right now," he said.

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